The Basic IS Model Embodies the Life Cycle and Permanent

question 98

Multiple Choice

The basic IS model embodies the Life Cycle and Permanent Income hypotheses by:

• A)setting consumption proportional to potential output.
• B)keeping consumption growth constant.
• C)setting consumption proportional to the real interest rate.
• D)setting consumption equal to past income.
• E)a and b are correct.

---

Definitions:

Credibility

The quality of being trusted and believed in, often considered in the context of individuals, organizations, or information.

Famous Economist

A renowned expert in the field of economics who has significantly contributed to economic theories, practices, or policies.

Reduce Taxes

A financial strategy aimed at lowering the amount of taxes owed by an individual or organization.

Implicit Associations

Implicit associations are unconscious links or connections between different concepts, feelings, or beliefs that influence an individual's attitude and behavior.